Key takeaways from Dr. Will Roper, Assistant Secretary of the Air Force for Acquisition, Technology and Logistics — at Air Force Techstars 2020 Demo Day:
• “You could not find a more fervent commitment from me and all of the Air Force and Space Force acquisition team that works with you”
• “We want to be the ‘good housekeeping seal of approval’ for our market so that it means something immediate to private investors”
• “If you are on an Air Force contract, they are RAISING your valuation”
A week ago our company formally completed the Air Force accelerator powered by Techstars program. We were lucky to be one of the ten companies selected, and it has transformed our business. During Demo Day, the final event of the program, Warren Katz, Managing Director of the Air Force accelerator powered by Techstars interviewed Dr. Will Roper, Assistant Secretary of the Air Force for Acquisition. Key points made by Dr. Roper follow, along with a link to the full interview.
WHY CHANGE WAS NEEDED
Speaking of the differences between last century and now, Dr. Roper said “in the cold war 80% of the R&D in this nation was done by defense — now 80% of research and development is done by commercial innovation.” And in response to this reality presented a change in acquisition philosophy: “We cannot continue to work with the same handful of defense companies year after year… [and instead will] grow a new kind of defense industrial base for this century that does not create primes.”
WHY STARTUPS SHOULD SEEK AN AIR FORCE CONTRACT
It was thrilling to hear Dr. Roper send such a strong signal of encouragement to startups like our 2020 cohort of the Air Force accelerator powered by Techstars. The Air Force is taking a strong stance that supporting new innovative startups is critical for the future, and actively seeks to be the earliest funding: “The military is a great first step, because we pay a higher price point than the commercial market, and you don’t have to get to the level of quantity that the commercial market needs to be successful.”
“We are patient in our investments, …and when you are able to solve one of our problems, you could not find a more tried and true partner — because the real world impact you have in our mission means you’re saving lives… You could not find a more fervent commitment from me and all of the Air Force and Space Force acquisition team that works with you, because for us to drop the ball means we’re putting risk in mission, and that is something we never intend to do on any given day.”
SIGNAL FROM VC IS CLEAR
The latests activities of the Air Force are viewed as game changing by Venture Capital investors too. Relating his experiences from many recent meetings with top VC firms, Dr. Roper recounted an incredible transformation in the relationship between startups with Air Force contracts and the investment world: “Two and a half years ago: ‘crickets’ from the world of private investment. “I couldn’t get them to return my calls, and when I did I had multiple major firms say the single saddest statement that I’ve heard since being in this job — that they ‘devalued‘ companies that were on an Air Force contract.
“last calendar year we went from less than one-to-one commercial to government matching so 75 cents on the dollar commercial to a dollar government to $3.10 commercial to a dollar government matching …what a huge paradigm shift in a year!”
Changes the Air Force has made the last couple of years have made a profound difference for startups, the Air Force is gaining access to the latest technological advancements, and investors are joining in: “Now those large investment firms have told me for the first time that ‘if you are on an Air Force contract, they are RAISING your valuation…and if we are putting you on a medium or a large bet, they are matching it without doing any further due diligence because they believe in our process.
“…we want to be the ‘good housekeeping seal of approval’ for our market so that it means something immediate to private investors.”
The numbers tell the story! Dr. Roper confidently said: “Just tell them you’re on an Air Force Phase 2 contract, and that means they should match exactly what we put in if not more… I pulled the statistics: from 2005 to 2019 the department of the Air Force did 5.3 billion dollars worth of small business investments. Twenty five percent of that funding went to 50 companies. During that period of 14 years, only a billion dollars of private investment came in. Last year we brought 700 new companies into our ecosystem…and 1.3 billion dollars of private investment came in, in one year alone.”
At MSBAI we are grateful to be doing business with the Air Force. Please check out our demo day pitch:
MSBAI is a privately held small business located in Los Angeles, CA, developing GURU, the ultimate engineering AI assistant. http://msb.ai
About the Air Force Accelerator Powered by Techstars
A partnership between Techstars, the U.S. Air Force, NSIN, and BAE Systems FAST Labs, the Air Force Accelerator Powered by Techstars was launched in 2018 with the goal of connecting the Air Force to early stage commercially-oriented startups with innovative technologies. Of 20 alumni companies in the first two years, 19 have gone on to win a collective $20+ million in Department of Defense contracts from AFWERX/AFRL’s newly re-designed Small Business Innovation Research (SBIR) “Open Topic” program. Many of these companies are also executing proof-of-concept projects from commercial entities and have raised significant private investment as well.